The Ups and Downs of Cuba’s Private Sector

By Raudiel F. Pena Barrios  (Progreso Semanal) 


HAVANA TIMES — Ever since new restrictions on self-employment came into force on August 5th, there has been one word that has become fashionable among those who have or wanted to have a private business: uncertainty.

Only having President Raul Castro’s words as a precursor, during his speech at the most recent plenary session of the National Assembly of People’s Power, where he announced on July 18th the decision to no longer hand out licenses to 30 self-employment activities, the most popular ones.

The Ministry of Labor and Social Security’s (MTSS) resolution makes it clear that this measure will be kept in force, until the aforementioned economic sector is fine-tuned. Meanwhile, the same regulatory provision establishes that these activities need to be better organized and controlled. Therefore, there are clearly aspects being revised.

This landscape has sparked a series of obvious questions which can bring a lot of doubts about those affected’s future: How long will this situation last? What does the new regulation involve and how much scope will it have? What will the implications of this be? Will licenses for other self-employment activities be suspended in the near future? Will some of these activities be removed from the authorized list? Will we make progress in recognizing our micro, small and medium-sized businesses (SMEs).

If we take these questions into consideration, as well as others which might arise, there is of course a lot of uncertainty. I have heard economists say that uncertainty is bad for business. Well, I will paraphrase them and say that legal uncertainty is too. If we were to approach this matter and look at it through the legal lens, the decision that we have been talking about infringes upon the necessary legal protection that any sector of the economy needs.

The needs, including laws and regulations, as well as other benefits that should be available to independent labor, have been on the table for a while now. The majority of regulatory provisions which influence this sector, come from different hierarchies, issued by different state bodies.

Photo: Juan Suarez

Likewise, the government is trying to restructure this as its organization isn’t fitting with today’s reality and even political discourse recognizes this. Let’s remind ourselves that it was Raul Castro who was clear in his report to the last Cuban Communist Party (PCC) congress about the fact that the boom in self-employment and authorizing independent workers to hire their own workforce, has in practice led to the existence of SMEs.

These operate today without the legal status and are governed under a law that has been designed only for individuals dedicated to small commercial activities which are carried out by the worker and his family. Now, we should add to all of this the fact that the governing body of self-employment, that is to say, the MTSS is implementing a decision which will limit the quantitative growth of the private economic sector, for an indefinite period of time.

I must clarify that when I say “indefinite” I mean that the ministry’s resolution doesn’t establish just how long this fine-tuning process will be, and although authorities are making a big effort to say that it will be as soon as possible, that isn’t enough. In Law, timeframes aren’t defined as brief or extended periods of time, rather specific deadlines are needed, according to legal security. Especially since it was the public administration itself that outlined the laws that are now trying to be “tweaked”.

It’s understandable that the State couldn’t sit with its arms crossed in the face of corruption. However, the answer to this problem shouldn’t have been to stop handing out licenses for self-employment.

If they are so worried about counteracting phenomena such as the under declaration of taxable income, there are also doubts about how much the National Tax Administration of Cuba (ONAT) has lost in taxes which doesn’t correspond to some business’ functionality. While many of our self-employed are working as real SMEs in their daily operations, they are charged taxes based on their personal incomes, when in reality they need to be paying taxes in terms of their net profits.

Legal treatment adapted to what these businesses really are will be beneficial to everyone. On the one hand, it allows the State to collect more in terms of taxes, while it makes the correct introduction of private persons in the economic system viable, with a clear definition about their rights and duties. Considering the fact that in the Cuban socialist project, according to the government’s position, private property needs to fulfill a social function, and they need to limit the concentration of wealth as much as they can too, recognizing SMEs becomes key.

In this way and as if this was what the government wanted, these SMEs could contribute to sustaining strategic sectors in Cuba via sponsorship projects. Why can’t a small business contribute to maintaining a hospital or a school located in the same place they work?

Photo: Juan Suarez

Of course: once they are recognized as SMEs, they need to be allowed to do everything that a [State] company can do in Cuba today. As such, they’d be able to import supplies, something that will help them to survive in the face of a little developed national wholesale market, or be able to access credit abroad. Furthermore, in the face of criminal acts, only those implicit in committing these crimes would be held accountable and not the legal status of the business, ensuring its ability to continue operating, and seeking penal responsibility for the culprits.

A vision is needed which doesn’t identify the private sector as a necessary evil; but instead as a space that needs to absorb the state companies’ surplus labor, where corruption is multiplied. It should be accepted for what it is: a crucial space for the building of the desired prosperous and sustainable socialism.

Lastly, decisions like the most recent suspension of licenses have a political cost. The expansion and growth of individual commercial initiatives had been accompanied by the constant repetition that there is no going back.

You can’t recognize the existence of businesses that in practice operate as SMEs, which don’t have an appropiate legal framework, to then carry out control activities which don’t involve adjusting this law to our reality. In that sense, there is political credibility at stake; something which mustn’t lose strength at any cost otherwise everything else will be lost.

10 thoughts on “The Ups and Downs of Cuba’s Private Sector

  • To quote the penultimate paragraph of the original contribution by Jon:

    “In this sense parhaps the last 60+ years in Cuba can be a guiding light for the rest of the planet.”

    following being quoted, he then wrote:

    “But I never said anything about a guiding light.”

    My freedom to come and go as I please to Cuba is limited to a maximum of six months maximum at a time and subject to extending a visa after three months for 25 CUC. I comply with the law.

    My advice to John is to do a little bit of research about Cuba. He can look up the CDR himself on the web. It is equally obvious that at best he has only scant knowledge of the differences between various internal and external security services of different countries.
    My comments regarding the CDR and its relationship with the East German Stasi are based upon known matters of fact which nobody disputes.
    Jon in his innocence (a cover word for ignorance – possibly deliberate) asks who is in jail in Cuba as if he has never heard of ‘dissidents’.
    For one who claims that the Castro regime’s history in Cuba is “a guiding light”, to ask such questions is laughable.

  • Fine. But I never said anything about a guiding light. Though it is for many globally. I’m glad you can come and go as u please. An important freedom. Also in my ignorance I don’t know what the CDR is. I’ll assume it’s the Cuban FBI Stasi. So enlighten me. Who is in jail?

  • Yes, I live in Cuba most of the time Jon, but have no intention of meeting with you. Reason? The CDR was based upon the East German Stasi with its delared purpose being:

    “A collective system of revolutionary vigilance so that everybody knows who lives on every block, what they do on every block… what activities are they involved, and with whom they meet”

    I for one am not stupid enough to place any trust in communist sympathisers not to report me to the CDR.
    If you so admire the Castro regime; “Cuba can be a guiding light for the rest of the planet”, please explain why I should risk a visit to the Villa Marista for the inevitable confession and subsequent imprisonment. I do not joke about the Castro regime, I know its behaviour.
    Maybe you in your innocence do not know of the Villa Marista or the methods of MININT. But you feel able to describe the Cuban communist regime as “a guiding light”. Do tell us all, why it is that Cuba has the fourth highest rate of incarceration in the world – who is it that is in jail?
    No Jon, you find your own friends in Cuba!

  • I am reading E. H. Carr’s Bolshevik Revolution 1917 to 1923. I am finishing the 2nd volume and a discussion of NEP the new economic plan. They were dealing with some of the same issues as the article goes into re SME’s. I don’t pretend to have answers though obviously I find the topic fascinating.
    Education and health are a very big deal. Very few places on earth have it as well as it seems people have it in Cuba.
    There is nothing wrong with having a symbiotic relationship to other countries, China or Venezuela or wherever a sympathetic regime can be found. This does not seem to warrant an accusation of a failed economy.
    I have many more pages to read in tracing the evolution of Bolshevism, and to try to understand the aberration that was Stalinism. I was in E Berlin for a few days about 6 months before the wall came down. My inherent anti-communist sensibilities were confronted with what appears to have been a functioning society. A morning rush hour with many people getting on the trolley’s which I knew were the same across the USSR all having been built from the same plans. I also suspected I felt the hate, aversion those in the east must have felt as I passed from E to W Berlin and back again during the few days I was there.
    I am also aware, despite being white and lower middle class living here in NYC, of the hate and aversion many of us feel towards the police, their militarization, their murdering of Black men and increasing intolerance of social uprisings protesting climate change and war bellicosity.
    America is hell bent on pushing the planet to the point of no return in the face of climate change. The ship of the state of capital is full steam ahead in a sea of more and more icebergs that are calving. I think its true that with the incredible effort that is needed, the amount of sacrifice that is needed, to avert the cc calamity, that unless the sacrifice is shared equally by all, that humans will not survive this century.
    In this sense perhaps the last 60+- years in Cuba can be a guiding light for the rest of the planet?
    I want to visit Cuba and perhaps if you live there we could meet and discuss further?

  • Well why not support your opinion Jon with a few factual illustrations of:
    “a functioning economy with notable successes”?
    Let us assume that you are going to commence with education and medicine. Having done so, what else?
    How about agriculture, industrial production and manufacturing? Perhaps you can describe where to buy a door or paint?
    Havana Times certainly cannot be accused of being a “CIA project” when folks like you and others who are open communists, can express their views. You could truthfully relate that all media in Cuba are communist controlled and believers in free speech and democracy are not permitted.
    I don’t believe in innuendo, but say it as it is. I detest the dictatorship of communism and of the right. Do you?
    I am “even handed” in that if you search my contributions here over the years you will find that I have repeatedly spoken of the need back sixty years ago for Cuba to have a revolution to rid itself of Batista and his dictatorship. That revolution was supported by non-communists like Huber Matos – and thirty eight other purged revolutionaries who refused to support Fidel Castro imposing communism and Camilo Cienfuegos, who so conveniently disappeared allowing Raul Castro to become Head of the military.
    Can you be even handed and agree that the Cuban economy is under serious threat because of the position in Venezuela, reduction in energy supplies and ever increasing debt to China?

  • It is a functioning economy with notable successes. Can you not be even handed in your outlook. Or is Havantimes a CIA project of griping and innuendo?

  • Soviet style communism failed in Cuba like it did everywhere else. The patchwork that hangs on is living off Venezuela. Without Fidel, the leadership knows it is facing a dead end. But it is also terrified of change. Thus the recent pause on private licenses.

  • So are you actually suggesting Jon that after fifty eight years, the Cuban economy is a success under the Castro dictatorship?

  • Strictly speaking the Cuban economy is not a. “failure.” It is not what is termed a “failed state”.

  • Without a functional private sector, the Cuban economy is going no where. Nearly 6 decades of failure should be sufficient to inspire a change.

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